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Two little pieces of news about the rare earths today. Taken in combination I'm willing to predict that we've about four or five years before the market is in glut again. As opposed to the very high prices and supply squeeze of the present. The first is this:

Fears the global technology supply chain could be throttled by China's interest emerged over the weekend after Japan and Vietnam announced the inauguration of a rare earth technology centre in Hanoi, as the two countries look to accelerate their mining plans.

This technology centre is being jointly financed and is to look at how the Vietnamese deposits could be exploited. The second is this little snippet from one of the technology newsletters (the mining technology that is):

FYI, TMR is tracking a total of 429 rare-earth projects under development associated with 261 different companies in 37 different countries.

Now an awful lot of those projects aren't going to go anywhere at all. For that is the way of the mining industry, terribly subject to fads and booms and busts. In a boom almost any three people with a story to tell can finance a "project". But the percentage of those that ever end up producing anything is low: 5% would be a high estimate.

But aside from the junior miners (what we tend to call those with a plan and a checkbook but not anything of any real substance) there are a number or larger players coming into production. The global rare earths market is perhaps 150,000 tonnes a year of mixed oxides. Molycorp is on track to be producing 20,000 tonnes a year soon. Lynas Corp is about to commission its Malaysian separation plant: when that whole system is in full production we might be talking of another 20,000 tonnes a year. GFW has their South African project (disclosure, I know one of the directors there but do not deal or trade with them). There are numerous other smaller operations that have every possibility of coming into production as well as a few large ones that could, if they can attract the necessary financing.

For rare earths just are not rare. There's plently of places around the world where they can be found and extracted. While it is true that China currently produces some 90-95% of consumption this isn't because China has the only deposits. It's because they were willing to sell their production cheaply enough that no one else bothered to mine for them.

There's one more point to be made about the rare earths: with the lanthanides. You cannot go mining just for one of them. If you want the neodymium and dysprosium for magnets, the terbium for CFLs, then you've got to produce the cerium and lanthanum as well. And you'll always end up with much more of the latter two than the first three. Before the Chinese restrictions on exports the La and Ce were often selling at a discount to production cost: for they were simply by-products of the extraction of the more desirable and more expensive elements.

As the man said, prediction, especially about the future, is very difficult. But I for one would not be in the least surprised to see rare earth prices tumble over the next few years. It just wouldn't surprise me at all to see cerium and lanthanum oxides back at $5 or $10 a kg. Some producers, given their efficiencies and their higher concentrations of the more valuable metals, will still be profitable at these prices. But the majority of those 429 projects will not be.